skf year-end results 2014 alrik danielson, president and ceo 28 january 2015
TRANSCRIPT
SKF Year-end results 2014Alrik Danielson, President and CEO
28 January 2015
© SKF Group 28 January 2015
Examples of new business in Q4 2014
•GE Aviation and Safran Group, Mainshaft and gearbox (Snecma & Hispano-Suiza) bearings
•Chongqing Gearbox Co., Ltd, China Bearing sets
•Andritz Hydro, Germany Special bearing and sealing solution
•Mazda, Mexico Low-friction wheel bearing units
•Daimler, Germany Wheel hub bearing units
•Jiangsu Jintongling Fluid Machinery Co., Ltd, High-speed permanent China magnetic motor unit solutions
Slide 2
© SKF Group 28 January 2015
Examples of new business in Q1 – Q3 2014
• Hindustan Aeronautics Ltd, India Customized bearings for helicopter transmission and main rotor
• Bell Helicopter Textron Inc.,USA Elastomeric bearings
• Turbogaz, Ukraina Magnetic bearings
• SCA, BillerudKorsnäs, Condition monitoring solutionsVattenfall, Sweden
• Geely Automobile, China Transmission seals
• Volkswagen, Germany Energy efficient tapered roller and ball bearings
• Envision Energy, China Strategic long-term partnership
Slide 3
© SKF Group 28 January 2015
Examples of new business in Q1 – Q3 2014
• Dongfang Electric New Energy, China Main shaft bearingsequipment
• Aurizon, Australia Service contract
• Doosan Heavy Industries and SKF Supergrip Bolts Construction, South Korea and SKF Nautilus bearing
• HSD SpA, Italy Super precision bearings and engineering support
• Tesla Motors, USA Bearing for the gearbox, e-motor and wheels
• Volvo Cars, Sweden Wheel hub bearing units
• Scania, Sweden Wheel bearing units and highpressure valve stem seals
Slide 4
© SKF Group 28 January 2015
Customer awards Q4 2014
Slide 5
• Best supplier award – Kirloskar Pneumatic Company Ltd., India
• Best supplier award – Nanjing Gearbox Company, China
• Top runner-up ’Best Vendor’ – Tata Steel, India
• Winner ’Cloud’ category – Software AG Innovation Awards
• Supplier Quality Excellence awards 2014 – General Motors, USA
• Quality Silver Award 2014 – Bajaj Auto Limited, India
© SKF Group 28 January 2015Slide 6
Examples of new technologies, products and solutions 2014
Compact tapered roller bearing unit for heavy freight
PuraBreeze 100
SKF Mudblock cassette seals, MUD 11
SKF @ptitude Connect
Floating piston
Tapered roller bearing unit for passenger railway applications
SKF Gear Bearing Unit
Electric grease transfer pump
SKF Wireless Machine Condition Sensor
SKF Tachometer
SKF Wireless MicroVibe
SKF Oil Injection Sets - THKI series
© SKF Group 28 January 2015
SKF Group – Q4 2014
Slide 7
Financial performance (SEKm) 2014 2013
Net sales 18 499 16 430Operating profit 1 608 -1 547Operating margin, % 8.7 -9.4Operating margin excl. one-time items, % 11.2 11.0Profit before tax 1 293 -1 760Basic earnings per share, SEK 1.84 -4.57Cash flow after investments before financing 2 053 -6 732
Organic sales growth in local currency:
SKF Group 2.8% Europe 1%
Strategic Industries 7.4% North America 2%Regional Sales and Service 2.2% Asia 8%
Automotive -0.5% Latin America 4%Middle East and Africa -5%
Key pointsSales volumes up by 1.8% y-o-y.Manufacturing was relatively unchanged compared to last year.
© SKF Group 28 January 2015
SKF Group – 2014
Slide 8
Financial performance (SEKm) 2014 2013
Net sales 70 975 63 597Operating profit 7 801 3 693Operating margin, % 11.0 5.8Operating margin excl. one-time items, % 11.7 11.9Profit before tax 6 668 2 821Basic earnings per share, SEK 10.10 2.0Cash flow after investments before financing excl. EU payment 4 693 5 342Cash flow after investments before financing 1 868 5 342
Organic sales growth in local currency:
SKF Group 3.9% Europe 1%
Strategic Industries 8.4% North America 3%Regional Sales and Service 1.8% Asia 10%
Automotive 2.0% Latin America 1%Middle East and Africa 9%
Key pointsSales volumes up by 3.3% y-o-y.Manufacturing was slightly higher compared to last year.
© SKF Group 28 January 2015
Organic sales growth in local currency
Slide 9
-10
-8
-6
-4
-2
0
2
4
6
8
% changey-o-y
2012 2013 2014
© SKF Group 28 January 2015
Organic sales growth in local currency
Slide 10
2012 2013 2014-4
-2
0
2
4
6
% y-o-y
Structure in 2012: 0.4%Structure in 2013: 2.5%Structure in 2014: 3.7%
-2.5%
-0.7%
3.9%
© SKF Group 28 January 2015
Sales development by geographyOrganic growth in local currency Q4 2014 vs Q4 2013
Slide 11
Europe1%
Asia/Pacific8%
Middle East& Africa
-5%
LatinAmerica
4%
NorthAmerica
2%
© SKF Group 28 January 2015
Sales development by geographyOrganic growth in local currency 2014 vs 2013
Slide 12
Europe1%
Asia/Pacific10%
Middle East& Africa
9%
LatinAmerica
1%
NorthAmerica
3%
© SKF Group 28 January 2015
Components in net sales
Slide 13
2012 2013 2014
Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6 1.9 1.8
Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8 5.4 0.9
Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 1.0 1.3 1.0
Sales in local currency
1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5 8.4 8.6 3.7
Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3 8.9
Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5 13.9 12.6
© SKF Group 28 January 2015
Operating profit as reported
Slide 14
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500SEKm
2012 2013 2014
© SKF Group 28 January 2015
Operating profit excluding one-time items
Slide 15
0
500
1000
1500
2000
2500SEKm
2012 2013 2014
© SKF Group 28 January 2015
Operating margin
Slide 16
2012 2013 20140
2
4
6
8
10
12
14
16
%
5.8
11.3
12.0* 11.9*
One-time items
* Excluding one-time items
11.0
11.7*
© SKF Group 28 January 2015Slide 17
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4-3
0
3
6
9
12
15
18
Regional Salesand Service
Specialty Business
Automotive
%
2012 2013 2014
Operating margin per business area as reported
Strategic Industries
© SKF Group 28 January 2015Slide 18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4-3
0
3
6
9
12
15
18
Regional Salesand Service
Specialty Business
Automotive
%
2012 2013 2014
Operating margin per business area excl. one-time items
Strategic Industries
© SKF Group 28 January 2015
Operating profit bridge, Q4 2014 excl. One-time items
Slide 19
0
500
1000
1500
2000
2500
3000
-1 547
+75+2 078+165 +23
+110
+300 -398
SEKm
Q4 2013 Q4 2014Volumes excl.
Specialty
Business
Specialty
Business
Savings Currencies Other* Price/mixexcl.
Specialty Business * R&D, S&A, IT, inflation etc.
+1 803
One-time items2013: - 3 3502014: -470
© SKF Group 28 January 2015
Operating profit bridge, 2014 excl. One-time items
Slide 20
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
+7 568+505 +8 291+390
+375+500 +180 -1 227
SEKm
2013 2014Volumeexcl.
Specialty
Business
Specialty
Business
Savings Currencies Other* Price/mixexcl.Specialty Business * R&D, S&A, IT, inflation etc.
One-time items2013: - 3 8752014: -490
© SKF Group 28 January 2015
Net working capital as % of annual sales
Slide 21
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q425
26
27
28
29
30
31
32
33
34
35
%
2012 2013 2014
Target: 27%
© SKF Group 28 January 2015
Return on capital employed
Slide 22
2012 2013 420040
5
10
15
20
%
13.9
7.5
16.2
17.1*15.1*
One-time items * Excluding one-time items
ROCE: Operating profit plus interest income, as a percentage of twelve months rolling average of total assets less the average of non-interest bearing liabilities.
14.8*
© SKF Group 28 January 2015
-7,000
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
Cash flow, after investments before financing
Slide 23
SEKm
2012 2013 2014
Excl. acq. and div.: 1) Q3 2012 SEK 1 707 million2) Q1 2013 SEK -69 million3) Q3 2013 SEK 871 million4) Q4 2013 SEK 1 170 million
Excl. EU payment 5) Q2 2014 SEK 1 423 million
4) 5)1)
3)
2)
© SKF Group 28 January 2015
Net debt
Slide 24
-35,000
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0SEKm
2012 2013 2014
AB SKF, dividend paid (SEKm):2012 Q2 2 5042013 Q2 2 5302014 Q2 2 530
Cash out from majoracquisitions (SEKm):
2012 Q3 8292013 Q1 8232013 Q4 7 900
Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
EU payment (SEKm):
2014 Q2 2 825
© SKF Group 28 January 2015
Debt structure, maturity years
Slide 25
2015 2016 2017 2018 2019 2020 20210
100
200
300
400
500
600
700
800
900
EURm
• Available credit facilities:EUR 500 million 2019SEK 3 000 million 2016
EUR 150 million 2017
• No financial covenants nor material adverse change clause
200
100 100 110
500 500
850
© SKF Group 28 January 2015
January 2015: SKF demand outlook Q1 2015
Slide 26
Demand compared to the first quarter 2014The demand for SKF’s products and services are expected to be slightly higher for the Group, higher for Asia and relatively unchanged for Europe, North America and Latin America. It is expected to be relatively unchanged for Automotive Market and Specialty Business and slightly higher for Industrial Market.
Demand compared to the fourth quarter 2014The demand for SKF’s products and services are expected to be relatively unchanged for the Group, Europe and Latin America, and slightly higher for Asia and North America. It is expected to be relatively unchanged for Industrial Market and Automotive Market and slightly higher for Specialty Business.
ManufacturingManufacturing is expected to be higher year over year and compared to the fourth quarter.
© SKF Group 28 January 2015
SKF demand outlook Q1 2015, main regions
Share of net sales 2014
Europe 41%
Asia Pacific 25%
North America 25%
Latin America 6%
Total
Q1 2015 vs Q1 2014
+/-
++
+/-
+/-
+
Slide 27
Sequential trend for Q1 2015
© SKF Group 28 January 2015
SKF demand outlook Q1 2015, main business areas
Share of net sales 2014
Industrial Market
60%
Automotive Market
26%
Specialty Business
13%
Total
Q1 2015 vs Q1 2014
+
+/-
+/-
+
Slide 28
Sequential trend for Q1 2015
© SKF Group 28 January 2015
SKF sequential volume trend Q1 2015, Industries
Slide 29
14% Cars and light vehicles
6% Energy
28% Industrial distribution
14% Industrial, heavy, special and off-highway
11% Industrial, general
9% Vehicle service market
6% Aerospace
5% Railway
5% Trucks
2% Two-wheelers and Electrical
Share of net sales 2014
© SKF Group 28 January 2015
Guidance for the first quarter 2015*
Slide 30
• Tax level: < 30%
• Financial net: around SEK -250 million
• Currency impact on operating profit vs 2014Q1: SEK +300 million
Full year: SEK +900 million
• Additions to PPE: around SEK 1.7 billion for 2015
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group 28 January 2015
SKF’s programme to improve efficiency and reduce cost
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
2013 Q1 14
Q2 14
Q3 14
Q4 14
2014 Total
Cost, SEKm 200 250 190 0 50 490 0 100 20 220 340 1 030
People affected 530 410 320 0 130 860 0 170 30 100 300 1 690
Giving future gross savings:
Full year gross savings SEKm
150 100 80 0 40 220 0 100 5 100 205 575
Slide 31
Realized gross savings from total programme, SEKm
Restructuring
Q1 13
Q2 13
Q3 13
Q4 13
2013 Q1 14
Q2 14
Q3 14
Q4 14
2014
Restructuring 15 35 75 75 200 70 50 10 10 140
S&A 50 50 50 50 200 0 0 0 0 0
Purchasing 100 100 100 100 400 60 100 100 100 360
Total 165 185 225 225 800 130 150 110 110 500
© SKF Group 28 January 2015
New productivity improvement programme
• Main activities:Productivity gain through merging the industrial businesses- merger between Strategic Industries & Regional Sales and Service
worldwide- streamlining of supporting country organisations in all main countries
General staff optimization and productivity improvements- in Group Headquarters and central staff functions
- in the Automotive business
• Reduction of annual cost by SEK 1.2 billion by the end of 2016Total cost for the programme around SEK 1.4 billion1 500 people impacted. Major part of the programme implemented within 2015.
© SKF Group 28 January 2015
Cautionary statement
Slide 33
This presentation contains forward-looking statements that are based on the current expectations of the management of SKF.
Although management believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other government actions, fluctuations in exchange rates and other factors mentioned in SKF's latest annual report (available on www.skf.com) under the Administration Report; “Important factors influencing the financial results", "Financial risks" and "Sensitivity analysis”.